California Still a Wallflower at National Recovery Dance : Economy: The Fed's 'beige book' report shows solid growth in other parts of the country.

WASHINGTON — The U.S. economy is growing solidly in most of the nation except California, the Federal Reserve System reported Wednesday, as the government reported a surge in March factory business.

The Fed's "beige book" report on activity across the country underlined a pickup in the economy in the spring after two months of exceptionally severe winter weather.

"Solid economic growth is reported in most parts of the country," according to the summary prepared by the Federal Reserve Bank of San Francisco, which includes comment from all 12 district banks. It was a much stronger assessment of the economy's vigor than the last summary in March, which reported only moderate expansion.

"In California, conditions remain weak, although some positive signs are starting to emerge," the Fed said.

"Residential markets are starting to show signs of life" in the nation's most populous state. The report noted that in addition to home building and lending for housing construction, tourism in California is picking up.

Nationwide, price increases were restrained by competition, the Fed said, an encouraging sign that inflation was under control.

"It's more evidence the economy is on a brisk growth path and that so far the inflation genie is being kept in the bottle," said economist Robert Dederick of Northern Trust Co. in Chicago.

Separately, the Commerce Department said factory orders shot up 1.1% in March to a seasonally adjusted $274.7 billion--more than double Wall Street economists' expectations of a 0.5% increase. Orders fell 0.3% in February.

"It looks like a pickup after a rough winter," said economist Cynthia Latta of DRI/McGraw Hill Inc. in Lexington, Mass.

"Business is running along pretty strongly, and I wouldn't really look for any weak spots until summer, when we may see some slowdown in housing," she said.

The Fed survey, whose reporting period runs through April and is more current than the Commerce Department report, pointed out that manufacturing companies continue to do booming business.

"Production of autos, vehicle parts, steel and building materials is near capacity," it said.

Despite signs that some industries were reaching production limits, which could drive prices higher, the Clinton Administration professed no concern about inflation.

Labor Secretary Robert Reich, speaking to reporters at the White House, said: "There is no inflation on the horizon at all. Incomes are growing, but they are not growing in any ways that would signal inflation."

The United States and other industrial countries were busily intervening in world currency markets Wednesday to prop up the sagging dollar. Economists say the cheaper dollar increases the risk of inflation by pushing up prices of imports.